Sirius XM to acquire Pandora for $3.5 billion
An all-stock transaction, set to close in early 2019, would create what Sirius calls the "world's largest audio entertainment company."
Satellite radio giant SiriusXM announced Monday that it has agreed to acquire streaming music company Pandora for $3.5 billion in stock.
The acquisition of Pandora, the release says, "will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas." Sirius said it will make "investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle," while also promising, "no immediate change" in listener offerings.
Pandora, founded in 2000, was a pioneer in streaming music, although it has receded in prominence in recent years following the arrival of such consumer competitors as Apple Music and Spotify.
But by mid-2017, Sirius XM had agreed to invest $480 million in Pandora, which led to Pandora's original executive team leaving and the company exiting non-U.S. markets. The merger, now a reality, had been rumored as far back as 2014, around the time Apple acquired Beats.
The price SiriusXM is paying for Pandora is actually more than the $3 billion Apple paid for Beats in 2014. That deal bought Apple both Beats' headphone and electronics business and Beats Music, which went on to form the basis for the development of Apple Music.
The SiriusXM/Pandora deal comes at a time when streaming is a much more lucrative and mature business than it was four years ago, with streaming now earning 75 percent of the music industry's revenue.
Pandora posted revenue of $384.8 million in the quarter ended July 31, while SiriusXM earned $1.4 Billion in revenue the same quarter.
Pandora now offers both ad-supported and subscription tiers, with a total of 70 million active users. It had launched a $14.99 Premium Family plan this past spring, in order to more directly compete with Apple Music and other streaming services.
Both SiriusXM and Pandora are available through Apple CarPlay apps.
"We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora's strategic progress and stronger execution. We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses," Jim Meyer, Chief Executive Officer of SiriusXM, said in the announcement. "The addition of Pandora diversifies SiriusXM's revenue streams with the U.S.'s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further."
The merger, which includes a "go-shop" provision, has been approved by both companies' boards and is set to close in the first quarter of 2019, pending regulatory approval.
Satellite radio giant SiriusXM announced Monday that it has agreed to acquire streaming music company Pandora for $3.5 billion in stock.
The acquisition of Pandora, the release says, "will enable SiriusXM to significantly expand its presence beyond vehicles into the home and other mobile areas." Sirius said it will make "investments in content, technology, innovation, and expanded monetization opportunities through both ad-supported and subscription services in and out of the vehicle," while also promising, "no immediate change" in listener offerings.
Pandora, founded in 2000, was a pioneer in streaming music, although it has receded in prominence in recent years following the arrival of such consumer competitors as Apple Music and Spotify.
But by mid-2017, Sirius XM had agreed to invest $480 million in Pandora, which led to Pandora's original executive team leaving and the company exiting non-U.S. markets. The merger, now a reality, had been rumored as far back as 2014, around the time Apple acquired Beats.
The price SiriusXM is paying for Pandora is actually more than the $3 billion Apple paid for Beats in 2014. That deal bought Apple both Beats' headphone and electronics business and Beats Music, which went on to form the basis for the development of Apple Music.
The SiriusXM/Pandora deal comes at a time when streaming is a much more lucrative and mature business than it was four years ago, with streaming now earning 75 percent of the music industry's revenue.
Pandora posted revenue of $384.8 million in the quarter ended July 31, while SiriusXM earned $1.4 Billion in revenue the same quarter.
Pandora now offers both ad-supported and subscription tiers, with a total of 70 million active users. It had launched a $14.99 Premium Family plan this past spring, in order to more directly compete with Apple Music and other streaming services.
Both SiriusXM and Pandora are available through Apple CarPlay apps.
"We have long respected Pandora and their team for their popular consumer offering that has attracted a massive audience, and have been impressed by Pandora's strategic progress and stronger execution. We believe there are significant opportunities to create value for both companies' stockholders by combining our complementary businesses," Jim Meyer, Chief Executive Officer of SiriusXM, said in the announcement. "The addition of Pandora diversifies SiriusXM's revenue streams with the U.S.'s largest ad-supported audio offering, broadens our technical capabilities, and represents an exciting next step in our efforts to expand our reach out of the car even further."
The merger, which includes a "go-shop" provision, has been approved by both companies' boards and is set to close in the first quarter of 2019, pending regulatory approval.
Comments
Gobbling up Pandora looks like a last gasp to me, a gambit to remain relevant. Sirius has outlived its usefulness IMHO. If anything I'm more surprised at Pandora agreeing to tie their wagon to them.
Also, XM’s NPR news (talk) is highly compressed so it doesn’t sound very good. Meh.
For the ability to listen in the car or portable, I had to buy a device that cost a few hundred dollars and install a dock in my truck for it. I then paid $99/yr for the subscription, which I had no problem paying. Even got a subscription for my wife's new car too.
But then the prices skyrocketed, stations gained commercials & "music-only" stations gained hosts that mentioned sponsors while at the same time other music streaming services & podcasts took off.
I now avidly listen to streaming services and podcasts and haven't been a subscriber to Sirius for years.
My wife still renews her subscription at about $5/ month (when she threatens to cancel) for the basic music plan but prefers to use apple music streaming because its better and also has a more consistent signal vs the sirius satellites (lotta trees around us).
I think Sirius' only play here would be to try to bring some of its exclusive content to a competitively priced streaming service.
And yes they have an app and I use it occasionally, but to use it all the time would force me into an unlimited plan at an additional $56 per month, which is significantly more than I pay for the 5 radio subscriptions I have (SiriusXM subscription's can be had for much less than advertised). I am sure the audio streaming apps eat up limited data plans in short order as well.
The highly compressed complaint is way overblown and frequently mentioned by those who don't want to pay for the service or don't need it. For 99.99% of the people they cannot tell the difference nor do they care. If you are listening to audio in a car then the sound quality is already severely compromised, unless you have plowed a lot of dough into an aftermarket high-end system (I am not referring to anything that came with your car no matter what name brand the automobile manufacturer has attached to the audio system).
All that said a company buying any music service is a mistake. Pandora has nothing that can't be copied or improved upon, same for Spotify. Amazon Music and Apple Music. The only leverage these companies have is the size of their libraries and whether or not they have other revenue streams that can prop up the cost of the music licensing they all have to pay to stream. Pandora and Spotify do not nor do they have any future on their own other than burning through investor cash.
Disagree on the compression -- it's entirely noticeable on talk radio when I had the service, instantly noticeable as worse than terrestrial radio. Thus, switching back to normal radio + Apple Music just seemed like a no brainer.
I enjoyed having DJ-hosted channels, but not worth the trade off (but there was still a lot of repetition).
I really wish Apple would add more live stations though. That's something XM can't be bashed for.